Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

problem 1: Six years ago, you made a fully amortizing, thirty year, fixed rate mortgage for $350,000 at 4.5% and 80% LTV. Since then, the house has appreciated by a total of 20%. Assume you only ever made scheduled payments on the loan.

a) What was the value of your house 6 years ago when the mortgage was made?

b) What is your current equity? Your current LTV?

c) How much could you borrow today, if you wanted your new total loan-to-value to be 80%?

d) Suppose you want to borrow the amount in (c), on top of your current debt. Today, rates on 80% 24 year mortgages are 5.5%. What would have to the rate on a 24 year HEL for you to prefer keeping the old loan plus the HEL? Assume you will keep all mortgages for their full (remaining) term and only pay the scheduled amounts, and that there are no lender fees.

e) How does your answer in (d) change if the original loan had a 2% prepayment penalty?

problem 2: A property is available for sale that could normally be financed with a fully amortizing $80,000 loan at a 10% rate with monthly payments over a 25 year term.

a) What would be the monthly payments with “normal” financing?

b) The builder is offering the buyers a mortgage that would reduce the payments in (a) by 50% for the first year and by 25% in the second. After the second year, the mortgage reverts to the regular monthly payments for the remainder of the term. How much would the builder have to give the bank to buy down the payments as described?

c) Would you recommend the property be purchased if it was selling for $5,000 more than similar properties that do not have the buy-down available?

problem 3: An investor has owned a property for 15 years, the value of which is now $200,000. The balance on the original loan is $100,000 and the monthly payments are $1,100 with 15 years remaining. He would like to obtain $50,000 in additional financing. A new first mortgage for $150,000 can be obtained for at a 12.5% rate and a second mortgage for $50,000 at a 14% rate with a 15 year term. Alternatively, a wraparound loan for $150,000 can be obtained at 12% and for a 15 year term. All loans are fully amortizing and ignore taxes and fees.

a) Which alternative should the investor choose?

b) What is the wrap mortgagee’s return on investment?

problem 4: You always have had a very high FICO score. A bank has owned your fixed rate, fully amortizing 30 year loan for 10 years. The original principal was $300,000 with a note rate of 3.5%, and you only ever made scheduled payments. Current 20-year mortgages for prime borrowers are 6%. Ignoring prepayment effects, at what discount to face could the bank sell your mortgage for in the secondary market?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M92430

Have any Question? 


Related Questions in Basic Finance

One bond has 9 years until maturity and a coupon of 42 the

One bond has 9 years until maturity and a coupon of 4.2%. The coupon is paid semiannually. If the YTM is 6%, what is the value of this bond? There is another bond with 15 year to maturity with a coupon rate of 6%. This c ...

Als sport store has sales of 2720 costs of goods sold of

Al's Sport Store has sales of $2,720, costs of goods sold of $2,080, inventory of $516, and accounts receivable of $426. How many days, on average, does it take the firm to sell its inventory assuming that all sales are ...

Explain the advantages for senior management having

Explain the advantages for senior management having detailed, written policies for financial risk management? Define and explain what is meant by independent risk monitoring. How can senior management improve independent ...

1q norris co has developed an improved version of its most

1Q. Norris Co. has developed an improved version of its most popular product. To get this improvement to the market, will cost $48 million and will return an additional $13.5 million for 5 years in net cash flows. The fi ...

Examine the following pairs of puts which differ only by

Examine the following pairs of puts, which differ only by exercise price. Determine if any violate the rules regarding relationships between American options that differ only by exercise price. a. August 155 and 160 b. O ...

An investment costs 875000 today and is expected to produce

An investment costs $875,000 today and is expected to produce a one-time inflow at the end of year 8 of $1,430,000. What is the IRR of this project?

Assignmentscott and lisa smith recently got married and

Assignment Scott and Lisa Smith recently got married and moved to your area. They are both 30 years old. Scott just finished his residency in internal medicine and has been offered a job at Memorial Hospital as a staff d ...

1 in addition to the key words you should also be able to

1. In addition to the key words, you should also be able to define the following terms: third-variable problem directionality problem confounding variable random process placebo mundane realism experimental realism 2. De ...

Each of the following research designs has a potential

Each of the following research designs has a potential threat to the internal validity of the research. For each, indicate what the confounding variable is and how it might have been eliminated. a. The Pepsi-Cola Company ...

What are the benefits from the perspective of a shareholder

What are the benefits from the perspective of a shareholder of a dividend reinvestment plan? What is the difference between a stock dividend and a stock split? Why would a company want to use a reverse stock split? If a ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro